So it looks like financial reform is going to be Dodd-Dodd rather than Dodd-Corker. The consumer finance regulator is like the new public option, a real deal killer. Also not helping is the wider, harsher version of the Volcker Rule that a group of Dems have proposed. I call it the Goldman Sachs Rule since it is targeted at the supposed conflicts of interest GS has. Throwing GS into the mix further politicizes the process and makes compromise tougher. A real poison pill. But that might be the idea all along. Push a weak, Democrat-only bill vulnerable to a host of anti-bank amendments on the floor of the Senate. Then force Republicans to vote against them with the midterm elections looming. With the economy weak and healthcare unpopular, financial populist may be the only card Dems have to play.
Politics and policy from inside Washington
This Bloomberg story gives it the old college try with “Obama Defies Pessimists as Rising Economy Converges With Stocks.” It points out that the economy is expanding, job losses are down and stocks are up.
But that is not really the point is it? Unemployment is still twice as high as the average of the past two decades, and the recovery shows every signs of being a sluggish one given the depth of the downturn. Plus, the massive amount of public debt makes what growth there has been seem artificial. Certainly the public doesn’t seem to buying it, a view reflected by the cautious tone of the White House. Lots of talk about pulling the economy back from the brink, less talk about a new Morning in America.
Former Bear Stearns economist David Malpass is considering a run for US Senate in New York. If you believe in the wonder-working power of lower taxes, economic freedom and entrepreneurship, then you would probably find his candidacy an interesting one. The Washington Consensus, of course, is that spending cannot be cut so taxes must rise dramatically. Thus, Malpass would be a contrarian voice inside the Beltway.
Forget the polls. Look at what the lobbyists are doing. Not only are campaign contributions to Republicans on the rise, advocacy firms are looking to hire more GOPers. So says CQ:
With dozens of House Democrats looking vulnerable in November, lobbyists are prepping for narrower Democratic majorities on Capitol Hill next year — or a possible Republican takeover. “Democratic control initially caused a pendulum swing to Democratic-leaning firms,” said Drew Maloney, a Republican, who is managing director of Ogilvy Government Relations. “You’ll see a swing back towards the middle, where firms that have a bipartisan balance of strong players will be well-positioned in the new environment.”
Lobbying shops began adding Democrats to their rosters when the party won the House in 2006. The hiring trend crested two years later, when Barack Obama won the White House and Democrats took a filibuster-proof majority in the Senate. Since then, tales of hefty six-figure paydays for even junior Democratic aides have wafted throughout the Capitol, enticing many staffers to depart for once-in-a-lifetime salary offers. But with downtown firms now teeming with Democrats — and GOP party leaders betting big on Election Day 2010 — Maloney and other executives are putting Republican resumes on the top of the stack for the first time in four years. Ogilvy recently hired Republicans Justin Daly and John O’Neill to round out the firm’s practice.
Even the Podesta Group and other Democratic-leaning shops are succumbing to the GOP feeding frenzy. Podesta CEO Kimberley Fritts, a Republican, said she has recently hired three Republicans — Steve Northrup, Molly McKew and Robert Taylor — and is looking to perhaps add more.
Heavens, a Mort Zuckerman bid for US Senate in New York would be great fun. Not a guy who loves to press the flesh, but supersmart and interested in getting things done. I just wonder if these CEOs who want to go to Washington fully realize how incredibly boring being a senator is.
Of course, he won’t have to spend loads of time raising money. So that helps. (One of the interesting nuggets from Game Change, the 2008 presidential campaign book, is just how much Hillary hated raising money.) Disclaimer: I worked for Mr. Z for a dozen years at U.S.News & World Report.
It looks like the Conservatives in Britain are getting worried that their emphasis on deficit reduction is hurting the party with voters. Labour seems to be catching up in the polls:
The prospect of a hung parliament frightens financial markets, which fear a minority or coalition government would shy away from tough action on the deficit, which is set to exceed 12 percent of GDP this year, a level similar to that of crisis-hit Greece.
Labour plans to halve the deficit in four years with cuts starting next year but says turning off economic stimulus taps now could derail a tentative recovery from a deep recession. The Conservatives say this is too little, too late. They pledge to make an “early start” on deficit cutting if they win power, saying delay could cause a crisis of investor confidence and push up interest rates, but they have not given any figures.
The Conservatives’ uncompromising message on the need for belt-tightening may have turned off some voters, who fear public spending cuts could lead to job losses and poorer services. “The ‘age of austerity’ is a sound bite too far,” said Tim Bale, senior lecturer in politics at Sussex University and author of a recent book on the Conservatives.
Me: A Cameron loss would surely be noted in Washington as another lesson that root-canal economics doesn’t sell. Rather than a Deficit Commission, someone should suggest a Growth Commission to recommend ways to boost long-term economic growth in a fiscally responsible way.
Charlie Cook has it exactly correct in this piece of analysis:
I’ve spent the last couple of days talking to some of the brightest Democrats in the party that are not in the White House. And it’s very hard to come up with a scenario where Democrats don’t lose the House. It’s very hard. Are the seats there right this second? No. But we’re on a trajectory on the House turning over….
There are nine months, certainly things could happen, but the odds of unemployment being below 9 percent are minimal by the time of this election. We’re probably going to have a year of basically, more or less, 10 percent unemployment, which hasn’t happened since the Great Depression. I mean, in fact, in an even-numbered year there’s only been one month of double-digit unemployment in the post-War era. One month. And now we’re going to have probably about a year.
Me: Unemployment is The Variable. Anything other than a sharp drop is terrible news for Democrats. And there seems little chance the US economy will generate the level of economic growth this year necessary to generate hundreds of thousands of job per month.
A few points:
1) The much-hyped Volcker Rule proposal is failing fast in the U.S. Congress. But Paul Volcker himself probably isn’t that surprised. The former Federal Reserve chairman joked he was “just a photo op” even after President Barack Obama’s public embrace of his proposal to limit bank proprietary trading. More evidence that the moment for sweeping reform has probably passed.
2) The hope for any reform at all rests with the U.S. Senate’s new negotiating tag-team of Democrat Chris Dodd, chairman of the Banking committee, and Republican freshman Bob Corker. But Corker says the Volcker Rule isn’t going to be a “major topic” for discussion. And that is probably OK with much of the committee. As one banking industry lobbyist told me, “There is just not a lot of appetite among members of the minority or the majority to add [bank trading limits]. So I just don’t think you’re going to see it.”
3) Increasingly, the Volcker Rule looks more stunt than viable solution. Though Volcker had been pushing it for months, White House advocacy surprised both the Banking committee and banking industry. A poor way to introduce serious legislation in Washington. Lame-duck Dodd, who sees reform as his legacy, hears the clock ticking. A bill not passed by early summer is probably dead for the rest of this election year. His view: The Volcker Rule is a sudden and unwelcome complication.
4) Cynics saw it as a populist, knee-jerk response to the loss of a Massachusetts U.S. Senate seat held by Democrats for more than a half century. Even some Volcker Rule advocates admitted the plan didn’t directly address the regulatory failures that contributed to America’s financial meltdown. And although the proposal was introduced in January with great fanfare by Obama – Volcker standing prominently at his side – Senate Democrats say the creation of a new consumer finance regulator is actually the issue the White House is spending political capital on.
5) It is a reality that highlights the Obama administration’s scant interest in more extreme measures to limit the size of the banking sector or its activities. And if Volcker did harbor any small doubts about that, he shouldn’t any more.
A few thoughts on Evan Bayh’s stunning retirement announcement:
1) It helps move the prospect of a GOP Senate takeover from a fringe idea to consensus. Not there yet, but getting there.
2) Why does that matter? It could help nudge more Democrats to retire, particularly in the House and help Republicans recruit better candidates. (George Pataki in NY for US Senate?) And a big plus for Republican fundraising.
3) Forget talk about Bayh challenging Obama in 2012. Now, if Bayh was president with a lousy economy, then a challenge from the left (like Obama) might be a possibility. Intra-party centrist insurgencies are stuff of reporters’ imaginations.
4) A year ago, Dems thought they would gain seats in 2010. A few months ago, they thought they would hold the 60-seat supermajority or maybe lose a couple. Now a loss of seven seems quite reasonable.
5) Again, keep watching the unemployment rate and Obama’s approval rating. Washington insiders certainly are.
Illinois voters are not too thrilled with their choices for US Senate, according to Public Policy Polling:
I think one of the most striking things about last night’s Illinois primary results for Senate is how poorly both Alexi Giannoulias and Mark Kirk closed.
In the December Chicago Tribune poll Giannoulias was at 31%, followed by Cheryle Jackson at 17%, and David Hoffman with 9%. There were 35% undecided. Giannoulias ended up with 39% to 34% for Hoffman and 20% for Jackson. That suggests that over the final seven weeks of the campaign Hoffman picked up more than 70% of those who had been undecided to 23% for Giannoulias and less than 10% for Jackson. Not too impressive and you have to wonder how far Hoffman’s momentum would have carried him if he’d had another week or two.
Kirk didn’t do all that well as the campaign heated up either though. In that December survey he had 41% to 3% for Patrick Hughes and a total of 10% for the variety of lower tier candidates in the race. Based on the final results he appears to have picked up about 37% of the undecideds from that point on to 35% for Hughes and 28% for the assortment of less serious candidates. Given how little money any of his opponents were spending that’s not too impressive.